The Development Bank of Southern Africa (DBSA) says Africa is open for business as infrastructure projects on the continent account for a quarter of its loan book.
Speaking on the sidelines of the Africa Energy Sector Inward Buying and Investment Mission held in Midrand, DBSA chief risk officer Mpho Kubelo told Business Times that 25% of the bank’s R110bn loan book is used to fund the development of infrastructure projects including roads, rails, ports and airports.
“Our loan book sits at R110bn and out of that 25% sits on the continent and we have investments in different countries. We have been doing that north of 25 years and I think we have developed a very deep understanding of the continent and how we are financing it.”
Kubelo said DBSA’s African loan book is diversified and does not focus on energy alone.
“There are countries where we do not have energy exposure. In certain countries, you’ll find that the need is around road and rail infrastructure.”
The DBSA is a government-owned development finance institution (DFI), with a mandate to invest in infrastructure in South Africa and the rest of the continent. It has limited its scope to the Southern Africa region.
Kubelo said the Grand Inga Hydropower Project in the Democratic Republic of Congo, which at completion could supply 42,000MW to the DRC and the continent, is one of the projects the DBSA is involved in.
The institution was also working with the Agriculture and Rural Development Bank, the Industrial Development Bank and the New Development Bank to get project preparation finance to attract investors.
“A lot of it is thinking around how to get it going and who we need to bring in. The reality is this is not going to be done by DFIs, it is going to be impossible for it to be funded by DFIs. We see project appetite from international banks also investing in the continent. The DFIs are looking at the preparation of the project and getting to a stage where we can go to market and say how do we fund this.”
Kubelo said DBSA was a big investor in independent power projects with a sizeable exposure to Eskom and municipalities.
“Although we lend some of the money to municipalities, we lend to them to put towards energy and electricity projects. We have significant exposure to Eskom, but there are investors with larger exposure to Eskom. The government has provided exceptional support to Eskom through its challenges. We have seen commercial banks coming into play in terms of providing funding to Eskom.”
Davies Pwele, head of client coverage for the Southern African Development Community at DBSA, advocated for more intra-Africa trade.
“It’s a conversation that talks about our perception of ourselves as Africans. There is a real risk and a perceived risk. They will say for example it is very risky to do business in Zimbabwe or DRC, but if you go on the ground and see the people who are mining there, it is the same people who are telling us that it is risky. If you look at intra-Africa trade, the capacity is here in Africa.”
Lerato Mataboge, deputy director-general for export development, promotion and investments at the department of trade, industry & competition, said according to the World Bank 600-million Africans do not have access to energy.
“It is one thing to talk about high-level catalytic energy projects in so far as factories (are concerned), but if at the base level, your everyday person does not have electricity, there is something wrong in the way we are achieving our pan African vision for the continent.”
She said energy was a key driver for economic growth in South Africa and the continent and for the continent to industrialise it has to deal with the energy crisis.
“We have challenges in South Africa as far as energy is concerned; the continent by and large is also experiencing similar challenges. Energy is the backbone to reverse the trend of industrial stagnation. What matters to us is that whatever approaches we take to energy conceptualisation should be cognisant of human development,” she said.
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